Type I diabetes is an autoimmune disease where auto-immunity leads to slow, progressive destruction of pancreatic -cells and development of overt diabetes. Currently, there is no cure for type I diabetes, which is treated with insulin replacement therapy by daily injections. Immune modulation has the potential to arrest -cell destruction and several therapeutic strategies have shown great promise, although none have been identified which permanently prevents -cell destruction in new onset diabetic patients. Recent studies in the mouse non-obese diabetic (NOD) model of type I diabetes show that specific regulatory immune cell populations (Tregs) can arrest -cell destruction, and that agents which induce these Tregs can prevent type I diabetes in NOD animals. This proposal will test if a new therapeutic peptide, SP16, can be used to induce expansion of protective Treg populations in the NOD mouse model and thereby provide protection against beta-cell destruction and development of type I diabetes. Specifically, the experiments will test the hypothesis that SP16 treatment reverses new onset diabetes in NOD mice by stimulating expansion of tolerogenic APC and Treg populations. SP16 treatment is predicted to eliminate insulitis and restore normoglycemia in the NOD animals. If the data from the proposed study show that SP16 protects against development of type I diabetes, this will justify a formal preclinical development program, as well as a follow-on Phase II SBIR application, with the goal of submitting an Investigation New Drug (IND) application to the FDA in 2013. A successful IND submission would pave the way for a Phase I Clinical Trial, in new-onset pediatric type I diabetes patients or adult LADA patients (latent autoimmune diabetes in adults), where efficacy would result in improved C-peptide levels and suggest a potential paradigm shift in treatment of type I diabetes.